Case Facts:The petitioner challenged an order dated 28 January 2025 passed under Section 83 of the MGST Act attaching its bank account. The department alleged wrongful availment of Input Tax Credit (ITC) under Section 17(5)(d) and initiated proceedings under Section 67. The petitioner contended that the issue was purely legal and relied on judicial precedent and CBIC guidelines. It was argued that the attachment severely impacted business operations and lacked proper justification. Court Decision:The Court held that the power under Section 83 is drastic and must be exercised strictly in accordance with statutory conditions. It observed that no material was placed on record to show that the petitioner was likely to defeat the demand or that attachment was necessary to protect revenue. The impugned order was found to be based on insufficient reasoning and amounted to a colourable exercise of power. Upon instructions, the State agreed to withdraw the attachment order. The Court set aside the order and directed immediate operation of the bank account. Cases Referred by Court:Radha Krishan Industries vs State of Himachal PradeshSafari Retreats (Supreme Court judgment referred in context of ITC eligibility)
Goisu Realty Pvt. Ltd. vs State of Maharashtra & Ors. 31-01-2025
Case Facts:The petitioner challenged an order dated 28 January 2025 passed under Section 83 of the MGST Act attaching its bank account. The department alleged wrongful availment of Input Tax Credit (ITC) under Section 17(5)(d) and initiated proceedings under Section 67. The petitioner contended that the issue was purely legal and relied on judicial precedent and CBIC guidelines. It was argued that the attachment severely impacted business operations and lacked proper justification. Court Decision:The Court held that the power under Section 83 is drastic and must be exercised strictly in accordance with statutory conditions. It observed that no material was placed on record to show that the petitioner was likely to defeat the demand or that attachment was necessary to protect revenue. The impugned order was found to be based on insufficient reasoning and amounted to a colourable exercise of power. Upon instructions, the State agreed to withdraw the attachment order. The Court set aside the order and directed immediate operation of the bank account. Cases Referred by Court:Radha Krishan Industries vs State of Himachal PradeshSafari Retreats (Supreme Court judgment referred in context of ITC eligibility)
Court DecisionThe Court allowed the writ petition and quashed the show cause notice dated 19 September 2023 insofar as it was issued to the petitioner.The Court held:Section 122(1A) applies only to a taxable person:Section 122(1A) applies to a person who retains the benefit of transactions covered under clauses (i), (ii), (vii) or (ix) of Section 122(1), and at whose instance such transaction is conducted. Such person must necessarily be a “taxable person” as defined under Sections 2(107) and 2(94) of the CGST Act.The petitioner, being merely an employee and power of attorney holder of Maersk, was not a taxable or registered person and could not retain the benefit of the alleged transactions. Therefore, invocation of Section 122(1A) against him was wholly without jurisdiction.Jurisdictional ingredients not satisfied:The show cause notice did not disclose any material to establish that the petitioner retained the benefit of the alleged GST evasion or that the transactions were conducted at his instance. In absence of these basic elements, the notice was held to be illegal for want of jurisdiction and for non-application of mind.Section 137 could not be invoked in a demand notice under Section 74:Section 137 relates to offences by companies and falls under the chapter dealing with offences and penalties. The impugned notice was a demand cum show cause notice under Section 74, which pertains to determination of tax not paid or short paid. The Court held that such penal provisions could not be intermingled with demand proceedings, and such invocation against the petitioner was without jurisdiction.No vicarious liability under Sections 122 and 137:The Court held that no principle of vicarious liability could be read into Sections 122 or 137 so as to fasten liability on an employee for tax alleged to be evaded by the company.Disproportionate demand:The demand of ₹3731 crores from the petitioner, which was alleged to be the liability of Maersk, was held to be highly unconscionable and disproportionate.Accordingly, the show cause notice was quashed insofar as it applied to the petitioner. The connected writ petitions were also allowed on the same reasoning.
Shantanu Sanjay Hundekari vs. Union of India & Ors. 18-03-2024
Court DecisionThe Court allowed the writ petition and quashed the show cause notice dated 19 September 2023 insofar as it was issued to the petitioner.The Court held:Section 122(1A) applies only to a taxable person:Section 122(1A) applies to a person who retains the benefit of transactions covered under clauses (i), (ii), (vii) or (ix) of Section 122(1), and at whose instance such transaction is conducted. Such person must necessarily be a “taxable person” as defined under Sections 2(107) and 2(94) of the CGST Act.The petitioner, being merely an employee and power of attorney holder of Maersk, was not a taxable or registered person and could not retain the benefit of the alleged transactions. Therefore, invocation of Section 122(1A) against him was wholly without jurisdiction.Jurisdictional ingredients not satisfied:The show cause notice did not disclose any material to establish that the petitioner retained the benefit of the alleged GST evasion or that the transactions were conducted at his instance. In absence of these basic elements, the notice was held to be illegal for want of jurisdiction and for non-application of mind.Section 137 could not be invoked in a demand notice under Section 74:Section 137 relates to offences by companies and falls under the chapter dealing with offences and penalties. The impugned notice was a demand cum show cause notice under Section 74, which pertains to determination of tax not paid or short paid. The Court held that such penal provisions could not be intermingled with demand proceedings, and such invocation against the petitioner was without jurisdiction.No vicarious liability under Sections 122 and 137:The Court held that no principle of vicarious liability could be read into Sections 122 or 137 so as to fasten liability on an employee for tax alleged to be evaded by the company.Disproportionate demand:The demand of ₹3731 crores from the petitioner, which was alleged to be the liability of Maersk, was held to be highly unconscionable and disproportionate.Accordingly, the show cause notice was quashed insofar as it applied to the petitioner. The connected writ petitions were also allowed on the same reasoning.
Background & Relevant FactsThe petitioner, Guru Storage Batteries, a partnership firm based in Nagpur, challenged the action of Respondent No. 3 — the State Tax Officer, Kamptee — in blocking its Electronic Credit Ledger (ECL). The blocking was carried out by Mr. Ujval Shrirampant Deshmukh, a State Tax Officer, who is admittedly an officer of a rank below that of Assistant Commissioner. The respondents sought to justify this action by relying on a Notification dated 24/01/2020, contending that the Commissioner had delegated the power to block ECL to Respondent No. 3. The petitioner also alleged that illegal recovery notices were being issued consequent to the said blocking. Court Observations (Verbatim)"A perusal of Rule 86A of the Central Goods and Services Tax Rules, 2017, indicates that such a blocking can be done by the Commissioner or an officer authorized by him in this behalf, not below the rank of Assistant Commissioner. Admittedly, the respondent No.3 does not fall within that category and is an Officer of the rank below that of the Assistant Commissioner.""Though the Notification dated 24/1/2020 has been relied upon to contend that the power has now been delegated by the Commissioner to the respondent No.3 (page 104), the same is under the State GST Act, whereas Rule 86-A of the aforesaid Act would contemplate a delegation by way of amendment to the Rule. The Notification dated 24/01/2020, would be of no assistance to the respondents." Final VerdictThe action of Respondent No. 3 in blocking the ECL was held to be without authority and was quashed and set aside. The petition was allowed with no costs, and the Rule was made absolute. Cases ReferredDee Vee Projects Ltd. vs. Government of Maharashtra and Ors. — 2022(2) Bom.C.R. 239 (Bombay High Court)
Guru Storage Batteries vs. State of Maharashtra & Ors. 11-09-2023
Background & Relevant FactsThe petitioner, Guru Storage Batteries, a partnership firm based in Nagpur, challenged the action of Respondent No. 3 — the State Tax Officer, Kamptee — in blocking its Electronic Credit Ledger (ECL). The blocking was carried out by Mr. Ujval Shrirampant Deshmukh, a State Tax Officer, who is admittedly an officer of a rank below that of Assistant Commissioner. The respondents sought to justify this action by relying on a Notification dated 24/01/2020, contending that the Commissioner had delegated the power to block ECL to Respondent No. 3. The petitioner also alleged that illegal recovery notices were being issued consequent to the said blocking. Court Observations (Verbatim)"A perusal of Rule 86A of the Central Goods and Services Tax Rules, 2017, indicates that such a blocking can be done by the Commissioner or an officer authorized by him in this behalf, not below the rank of Assistant Commissioner. Admittedly, the respondent No.3 does not fall within that category and is an Officer of the rank below that of the Assistant Commissioner.""Though the Notification dated 24/1/2020 has been relied upon to contend that the power has now been delegated by the Commissioner to the respondent No.3 (page 104), the same is under the State GST Act, whereas Rule 86-A of the aforesaid Act would contemplate a delegation by way of amendment to the Rule. The Notification dated 24/01/2020, would be of no assistance to the respondents." Final VerdictThe action of Respondent No. 3 in blocking the ECL was held to be without authority and was quashed and set aside. The petition was allowed with no costs, and the Rule was made absolute. Cases ReferredDee Vee Projects Ltd. vs. Government of Maharashtra and Ors. — 2022(2) Bom.C.R. 239 (Bombay High Court)
BackgroundCIDCO (City Industrial and Development Corporation of Maharashtra Ltd.), incorporated on 17th March 1970, is designated as the New Town Development Authority under Section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966 (MRTP Act). In furtherance of its planning mandate, CIDCO allots residential-cum-commercial and hotel plots on 60-year leases through a tender process. Successful bidders pay a one-time lease premium (lump sum) plus annual lease rent. In April 2017, upon issuance of allotment letters, CIDCO demanded GST @ 18% on the total one-time lease premium via Demand Draft. Petitioners — an association of builders and a partnership firm — challenged this levy before the Bombay High Court after the GST Commissionerate failed to respond to their grievance correspondence. Court Observations (Verbatim)"A perusal of sections 7, 8, 9, 10 and 11 falling in this Chapter leaves us in no manner of doubt that the expression 'supply' includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.""Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered. We cannot then probe into the legislation any further.""It is entirely for the legislature, therefore, to exercise the powers conferred by sub-section (2) of section 7 of the GST Act and issue the requisite notification. Absent that notification, merely going by the status of the CIDCO, we cannot hold that the lease premium would not attract or invite the liability to pay tax in terms of the GST Act.""With respect, it cannot be said that the activities performed by sovereign or public authorities under the provisions of law, which are in the nature of statutory obligations are excluded from the purview of the present enactment.""Pertinently, the dividing line between governmental and non-governmental, sovereign and regal functions and otherwise is not very thin and post globalisation, liberalisation and privatisation."Final VerdictThe demand for GST on the one-time lease premium is held to be in accordance with law. The writ petition is dismissed and Rule is discharged. No order as to costs.
Builders Association of Navi Mumbai v. Union of India 28-03-2018
BackgroundCIDCO (City Industrial and Development Corporation of Maharashtra Ltd.), incorporated on 17th March 1970, is designated as the New Town Development Authority under Section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966 (MRTP Act). In furtherance of its planning mandate, CIDCO allots residential-cum-commercial and hotel plots on 60-year leases through a tender process. Successful bidders pay a one-time lease premium (lump sum) plus annual lease rent. In April 2017, upon issuance of allotment letters, CIDCO demanded GST @ 18% on the total one-time lease premium via Demand Draft. Petitioners — an association of builders and a partnership firm — challenged this levy before the Bombay High Court after the GST Commissionerate failed to respond to their grievance correspondence. Court Observations (Verbatim)"A perusal of sections 7, 8, 9, 10 and 11 falling in this Chapter leaves us in no manner of doubt that the expression 'supply' includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.""Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered. We cannot then probe into the legislation any further.""It is entirely for the legislature, therefore, to exercise the powers conferred by sub-section (2) of section 7 of the GST Act and issue the requisite notification. Absent that notification, merely going by the status of the CIDCO, we cannot hold that the lease premium would not attract or invite the liability to pay tax in terms of the GST Act.""With respect, it cannot be said that the activities performed by sovereign or public authorities under the provisions of law, which are in the nature of statutory obligations are excluded from the purview of the present enactment.""Pertinently, the dividing line between governmental and non-governmental, sovereign and regal functions and otherwise is not very thin and post globalisation, liberalisation and privatisation."Final VerdictThe demand for GST on the one-time lease premium is held to be in accordance with law. The writ petition is dismissed and Rule is discharged. No order as to costs.
